Monday, 28 May 2012

Many talented engineers see the startups that pop up and are successful and think "I could build that." From a technological perspective they are right. Because they are smart and generally see things as they could be, many talented engineers also have pretty good ideas on what the next big thing may be too. With the confidence that one can predict what's next and build it many engineers think they should go and start their own startup.

The interesting thing is that a similar question can be asked of investors: building a great company is about identifying green space and throwing talent and money at it. Great investors already have the connections and money and know-how to build companies like this. Why don't more investors start their own companies?

The problem with this is that it takes more than that to found a great tech company. At least one founder needs to be focussed on sales, PR, design, etc. Most engineers are bad at this, or at least don't really enjoy it. It takes a team with great communication and a singular vision to bridge that gap. Larry and Sergey had Eric. Wozniak and Jobs had Markkula. They worked great together and their skills complemented well.

If you have that friend and a great idea go for it. In fact you don't even need the idea. Complementing talents, being really talented and having hustle are way more important than having a good idea because your idea can change as you learn.

But what if you don't have that business-savvy friend? If you're a proper engineer, and the idea of doing sales pitches the rest of your life is truly frightening, the best thing for you to do is to treat your engineering skill the same way a VC treats their money: you need to be an investor.

Your job as an engineer with lots of places you could invest your talent is the same as a VC: find the company that will be the next Google / Facebook / Microsoft and be the 10th employee there. Keep an eye on the companies getting funded by top VC's and evaluate their markets and potential the same way.

The benefits to this over founding your own company are huge. You're already funded by top investors and growing rapidly. If it works out you still get quite wealthy, but you don't have the bagage that founders do. Founders have to stay with their baby forever. At the very least they can't go do something else apart from retire. Early employees have no such limitations. They are free to go start their own company or join another and can still retire early if they want.

If you're trying to get in on the tech boom to get rich, you must be confident the company you're joining can be the next many thousand employee, multi-billion dollar company. Tech companies follow a power law distribution[1] and thus most of the growth is concentrated in a couple big wins. The vast majority of companies (particularly those chasing tiny markets) will experience respectable growth, but will never "blow up" the way a couple do. Every year you get another Google, Facebook, Zynga, etc but their explosive growth happens once and never again. To win you need to jump on board before that explosive growth.

Non-engineers

The interesting next question is: what if you're not an engineer. What if you're more in product or finance and really want to work in tech? Does the equation change?

My intuition is that yes, it does but not as you might think. Fewer of the next Apple's first employees will be sales / econ people. By the time a tech company gets big enough to hire teams of these people the company is probably too big already for your career to grow with the company.

Because of this it is probably better for non-engineers who want to get in on tech to find a talented engineer or two and found their own company. If it doesn't grow to be the next Google, hopefully you can at least sell to Google and get to work there as a PM or strategist, which would never happen if you applied directly.

TL;DR

Startups need money and VC's are the investors that give it to them.
Startups also need talent, and employees are the investors that give them it.
Employees should evaluate companies the way investors do before joining.